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Supreme Court suspends tax on priests, nuns

India(Delhi):Outcome of the Supreme Court's order will have country-wide ramifications.

The Supreme Court of India has given temporary relief to priests and nuns who were asked to pay income tax for the salary they earn working in government-funded educational institutions.

The top court on May 9 asked authorities to maintain the status quo of not collecting such taxes and agreed to hear an appeal against an order of the Madras High Court in Tamil Nadu state.

The Supreme Court was hearing a challenge filed by the Institute of Franciscan Missionaries of Mary to a March 20 order of the state court that said missionaries, Catholic priests and nuns should not be exempt from paying tax on government-assisted salaries.

The top court posted the case for a final hearing Aug.7.

"We are happy that we got temporary relief," said Father L. Sahayaraj, deputy secretary of the Tamil Nadu Bishops' Council.

He said the Church in the state was determined to fight the case.

He told ucanews.com that Catholic priests and religious serving in government-aided educational institutions did not have any income because their salary is contributed to their convents or houses “so they cannot be asked pay income tax."

The state court ordered an end to this exemption on the basis that they received their salaries in their individual capacity and that surrendering salaries could only be treated as "application" of their income.

Their choice of application did not merit tax exemption, the court order stated.

The case dates back to 2015 when Tamil Nadu's income tax department instructed state-funded educational institutions to deduct tax from the salaries of priests, religious brothers and nuns, ending a long-standing convention making them exempt.

Church officials challenged the move in the High Court, which initially dismissed the income tax order. But the tax department appealed against the order, resulting in the March 20 decision.

Father Sahayaraj told ucanews.com that the state court initially accepted that since priests and nuns have taken a vow of poverty and surrender their personal income to the Church, no income is effectively accrued to them and they were therefore not liable to pay tax.

Father Sahayaraj said some 5,000 priests and nuns and religious brothers work in more than 2,800 church-managed, but state-aided, educational institutions in Tamil Nadu.

"The state should also consider their immense contribution helping the state educate millions, especially the poor," the priest said.

Catholic religious teaching in state-funded institutions was exempted from tax even before India became independent from British rule in 1947.

In 2015, southern Kerala state ended the practice and began to deduct tax from salaries.

In northern India, few priests and nuns are employed in state-funded schools. While some states like Jharkhand allow them a tax exemption, others do not.

The outcome of the Supreme Court’s order will have country-wide ramifications, including for states such as Jharkhand, said one lawyer who did not want to be named.